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TMI Blog2024 (5) TMI 723X X X X Extracts X X X X X X X X Extracts X X X X ..... ectively. As regards the place of provision for goods transportation services, other than by way of mail or courier, it is specifically stated as the place of destination of the goods under Rule 10 ibid. Considering the above legal provisions, in the present case, it is found that since the services are provided in respect of transportation of export goods, on the ocean voyage for delivery at the port of destination abroad, which is out of taxable territory , the services provided by the appellant cannot be covered under the service tax net, in the post negative list regime after 01.07.2012 also in terms of Section 66B ibid. Further, the findings given in the impugned order for rejecting application of Rule 10 ibid is on the ground that Rule 8 shall apply in the present case, as both service provider and recipient of the service are located in the taxable territory. In this regard it is found that, Rule 14 ibid specifically state thatnotwithstanding anything stated in any rule,where the provision of a service is, prima facie, determinable in terms of more than one rule, it shall be determined in accordance with the rule that occurs later among the rules that merit equal considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the exact amount of ocean freight; the charges mentioned in the invoice of the appellants towards freight to their clients with extra margin is not the ocean freight charges, and the difference amounted to service charges for which the appellants are liable to pay service tax under the taxable category of Business Auxiliary Services (BAS) in terms of Sections 65(19) and 65(105)(zzb) of the Finance Act, 1994. On completion of audit verification, the Department intimated the observation to the appellants on 07.04.2015 requesting them to pay the service tax along with interest. However, the appellants had contended that the extra margin on freight charges was profit made by them in trading of the space and no service was involved in such a transaction. Therefore, the Department had initiated show cause proceedings by issue of Show Cause Notice dated 21.10.2015 proposing for demand of service tax short paid during 2009-2010 to 2012-2013 along with interest by invoking extended period under proviso to Section 73(1) ibid, and for imposition of penalties under Sections 77, 78 ibid on the appellants. Further periodical demand was also issued for recovery of service tax short paid during 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid order has been upheld by the Hon ble Supreme Court, and thus the ratio of the said case is squarely applicable to their present case and the impugned order is liable to be set aside on the above basis. 3.3 Furthermore, learned Advocate also stated that the extended period of limitation cannot be invoked as the issue involved herein is of interpretation of legal provisions and there is no mention of any grounds in the SCN for such a demand under proviso to Section 73(1) ibid. Thus, he claimed that the SCN cannot be sustained as the grounds for revocation of extended period. Thus, learned Advocate prayed that on the ground of limitation also the impugned order cannot be sustainable and therefore prayed for setting aside the same and allow their appeal. 3.4 In support of their stand, learned Advocate had relied upon the following decisions of the Tribunal and the judgement of the Hon ble Supreme Court, in the respective cases mentioned below: (i) Greenwich Meridian Logistics(I) Pvt. Ltd.Vs. Commissioner of Service Tax, Mumbai 2016 (43) S.T.R. 215 (Tri. Mumbai) (ii) Phoenix International Freight Services Pvt. Ltd. Vs. Commissioner of Service Tax, Mumbai-II 2017 (47) S.T.R. 129(Tri. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness Auxiliary Services as per Section 65 (19) under the taxable under Section 65(105)(zzb) of the Finance Act, 1994 and Section 66B (erstwhile section 66) of the Finance Act, 1994 and they should not be held liable for payment of Service Tax at appropriate rate on their aforesaid activities, during the years 2009-2010 to 2012-2013; (ii) Service tax amounting to Rs.4,47,00,793/- (Rupees Four Crore Forty Seven Lakhs Seven Hundred and Ninety Three only) (inclusive of Education Cess and Secondary and Higher Education Cess)on the aforesaid Business Auxiliary Services , rendered during the years 2009-2010 to 2012-2013, as detailed above, should not be demanded and recovered from them under the Section 68 read with Proviso to Section 73 (1) read with Rule 6 of the Service Tax Rules, 1994; (iii) the interest at the appropriate rate onthe Service Tax demanded, as mentioned at clause (ii) above, should not be demanded and recovered from them under Section 75 of the Act; (iv) penalty should not be imposed for not disclosing true and correct information in respect of the value of the aforesaid services on which no Service Tax was paid in the half yearly returns by the due dates under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vity specified in subclauses (i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision, and includes services as a commission agent, but does not include any activity that amounts to manufacture of excisable goods. xx xx xx xx xx (b) excisable goods has the meaning assigned to it in clause (d) of section 2 of the Central Excise Act, 1944 (1 of 1944); (c) manufacture has the meaning assigned to it in clause (f) of section 2 of the Central Excise Act, 1944 (1 of 1944). Section 65(105). taxable service means any service provided or to be provided, (zzb) to a client, by 1[any person] in relation to business auxiliary service; Substituted for a commercial concern by the Finance Act, 2006, w.e.f. 1-5-2006. Valuation of taxable services for charging service tax. 67. (1) Subject to the provisions of this Chapter, where service tax is chargeable on any taxable service with reference to its value, then such value shall, (i) in a case where the provision of service is for a consideration in mone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they consisted of a service which gives them their essential character, insofar as this criterion is applicable; (c) when a service cannot be classified in the manner specified in clause (a) or clause (b), it shall be classified under the subclause which occurs first among the sub-clauses which equally merit consideration. Post Negative List regime(w.e.f. 01.07.2012): 65B(44) service means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include (a) an activity which constitutes merely, (i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or (ii) such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of article 366 of the Constitution; or (iii) a transaction in money or actionable claim; (b) a provision of service by an employee to the employer in the course of or in relation to his employment; (c) fees taken in any Court or tribunal established under any law for the time being in force. Explanation 1. For the removal of doubts, it is hereby declared that nothing contained in this clause shall apply to, (A) the fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use (105) of Section 65 of the Finance Act, 1994.Thedefinition of taxable services under the category of Business Auxiliary Services (BAS) covered specifically under the taxable clause (zzb) of Section 65(105) ibid include any service provided to a client in relation to BAS. Thus, the definition provided for the phrase Business Auxiliary Services under Section 65(19) ibid holds the determining test to see, whether the activity of purchase of cargo/container space in bulk, which is available with a particular shipping line, in advance for an agreed price paid by appellants and subsequently selling the same to different customers is covered under the scope of such definition so as to make it liable to be tax under the service tax net as per Section 65(105)(zzb) ibid. From the nature of transactions entered into by the appellants with the shipping line, it is found to be on principal-to-principal basis. Though the actual transportation of goods during ocean voyage is undertaken by the shipping lines, the appellants are not marketing or acting as agents for the shipping lines, but are engaged in sale of such space of container/cargo in ship s ocean voyage. The definition of business su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llful mis-statement or suppression of facts under tax demands is no more open to dispute, as the Hon ble Supreme Court in the case of Uniworth Textiles Ltd., Vs. Commissioner of Central Excise, Raipur 2013 (288) E.L.T. 161 (S.C.)had held that the onus is on the Revenue to prove the presence of such specific grounds. The relevant paragraph of the above judgements is extracted below: 24. Further, we are not convinced with the finding of the Tribunal which placed the onus of providing evidence in support of bona fide conduct, by observing that the appellants had not brought anything on record to prove their claim of bona fide conduct, on the appellant. It is a cardinal postulate of law that the burden of proving any form of mala fide lies on the shoulders of the one alleging it. This Court observed in Union of India v. Ashok Kumar Ors. - (2005) 8 SCC 760 that it cannot be overlooked that burden of establishing mala fides is very heavy on the person who alleges it. The allegations of mala fides are often more easily made than proved, and the very seriousness of such allegations demand proof of a high order of credibility. 25. Moreover, this Court, through a catena of decisions, has hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rated in the proviso to the said sub-section are more than one and if the Excise Department places reliance on the proviso it must be specifically stated in the show-cause notice which is the allegation against the assessee falling within the four corners of the said proviso.... ( Emphasis supplied ) 26. Hence, on account of the fact that the burden of proof of proving mala fide conduct under the proviso to Section 28 of the Act lies with the Revenue; that in furtherance of the same, no specific averments find a mention in the show cause notice which is a mandatory requirement for commencement of action under the said proviso; and that nothing on record displays a wilful default on the part of the appellant, we hold that the extended period of limitation under the said provision could not be invoked against the appellant. On the basis of above judgement of the Hon ble Supreme Court and on the facts of the case, we find that there is no specific grounds invoked for suppression of facts or willful mis-statement on the part of the appellants, particularly when the entire records of the appellants including periodical returns filed were available with the department. Thus, we are of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a to the post of destination Yangon, Myanmaris specifically mentioned. Besides the above freight charges, the break-up details of the amount of terminal handling charges, documentation charges and material handling charges have also been mentioned separately in the said invoice and the service tax paid at the appropriate rate has also been duly indicated thereon. Further, the appellants had also issued the Bill of Lading for the sea voyage of the goods. Thus, the transactions undertaken by the appellants in respect of cargo/ container space is not covered under the scope of taxable category of Business Auxiliary Service as it is only involve multimodal transport of export goods for ocean voyage. Thus, we find that the demand of short payment of service tax without firstly determining the grounds or legal basis on which such short payment was liable to be recovered were made out in the impugned order and therefore, on this ground itself the impugned order is not sustainable. 10.1 From plain reading of the legal provisions relating to Place of Provision of Services Rules, 2012 it clearly transpires that the place of provision of service in general has been specified under Rule 3 ibid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h freight element. The relevant paragraphs of the said order are extracted and given below: 6. We notice that the appellant has admitted to receiving commission from shipping lines on account of freight and discharge of tax liability on the same. However, we find no justification for fastening the same liability on all other receipts of the appellant. In Bax Global India Ltd. v. Commissioner of Service Tax, Bangalore [2008 (9) S.T.R. 412 (Tri.-Bang.)], the Tribunal held. 9 Summing up, we find that the appellants had already discharged the duty liability in respect of the Customs House Agent activities undertaken by him. As regards all the other activities, we find that they do not relate to customs house agent activities. Even if any profit has been made in respect of those activities, they cannot be subjected to service tax in view of the Apex Court decision in the Baroda Electricity Meters Ltd. case 7. Each source of income must, therefore, be looked at independently. A service provider is not necessarily a specialist in rendering one service; the earnings of a service entity may accrue from one or more services - some of which may be taxable. Finance Act, 1994 does not envisage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the entity that is in possession of space on a vessel from an entity that requires the space for carriage of cargo. 11. Slots may be contracted for by the shipper or its agent with the shipping line through the steamer agent. Implicit is a uni-directional flow of consideration because the space belongs to the shipping line. Steamer agent or agent of shipper may earn commission in such a transaction. Leaving that situation aside, the contention of the appellant is that it is a multi-modal transport operator which entails a statutorily assigned role in cross-border logistics. According to Section 2 of the Multi-modal Transportation of Goods Act, 1993. (m) multimodal transport operator means any person who - (i) concludes a multimodal transport contract on his own behalf or through another person acting on his behalf; (ii) acts as principal, and not as an agent either of the consignor, or consignee or of the carrier participating in the multimodal transportation, and who assumes responsibility for the performance of the said contract; and (iii) is registered under sub-section (3) of section 4; and (a) carrier means a person who performs or undertakes to perform for a hire, the carria ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hence he stated that the decision of the Tribunal is not relevant. We find that in the order of the Tribunal in the case of Greenwich Meridian Logistics (I) Ltd. (supra), there is no mention of the assessee being an agent of the exporter. Rather it specifically stated in that order that a registered multi-modal transport operator is not an agent of either the shipper or the carrier . Thus, we find that the learned Commissioner has not properly brought out the facts in ignoring the decision of the Tribunal, to come to the conclusion that it is not relevant. 11.2 We also find that the Tribunal in the case of Karam Freight Movers (supra) has held that mere sale and purchase of cargo space and earning profit in process is not taxable activity under service tax statute. The relevant paragraphs of the said order are extracted and given below: 11. On the second issue regarding the service tax liability of the respondent under BAS, we find that the impugned order examined the issue in detail. It was recorded that the income earned by the respondent to be considered as taxable under any service category, should be shown to be in lieu of provision of a particular service. Mere sale and purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind any impropriety in the said finding. The grounds of appeal did not bring any contrary evidence to change such findings. Accordingly, we find no merit in the appeal by Revenue. The appeal is dismissed. 11.3 We further find that the Tribunal in the case of EMU Lines Ltd. (supra) by relying on the earlier referred decisions of the Tribunal in the case of Greenwich Meridian Logistics (I) Ltd., Karam Freight Movers, Bax Global India Ltd. has held that said activity of sale of cargo/container space is not taxable for payment of service tax. The relevant paragraphs of the said order are extracted and given below: 4.5 After consideration of the submissions made, Tribunal has observed as follows:- 6. We note that similar issues came up for decision before the Tribunal. The Tribunal after examining the facts held that in the arrangement relating to shipment of cargo provided by the shippers, the freight element or any profit on such freight cannot be subjected to tax under BAS. A reference can be made to a recent decision of the Tribunal in Bax Global India Ltd. v. CST, Chennai vide final order No. 42113 of 2017 dated 18/09/2017 and in Greenwich Meridian Logistics (I) Pvt. Ltd. v. CST, M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncipal transaction. We, therefore, find that freight is paid to the shipping line and freight is collected from client-shippers in two independent transactions. 13. The notional surplus earned thereby arises from purchases and sale of space and not by acting for a client who has space or slot on a vessel. Section 65(19) of Finance Act, 1994 will not address these independent principal-to-principal transactions of the appellant and, with the space so purchased being allocable only by the appellant, the shipping line fails in description as client whose services are promoted or marketed. 5.1 As we find the issue is squarely covered by the above two decisions, we do not find merit in the impugned order. 5.2 The impugned order is set aside and the appeal allowed. 11.4 Furthermore, we also find that the issue of service tax liability in respect of the activity of sale of cargo/container space as held by the Tribunal in the case of EMU Lines Ltd. (supra) was upheld by the Hon ble Supreme Court in Civil Appeal No.1479 of 2023 by dismissing the appeal filed by the department. The said order of the Hon ble Apex Court is extracted below : 12. In view of the above analysis of the legal provis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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